Summary：As of April 8, domestic PE and PP futures have stepped out of Liulianyang market, and the daily pattern is good. From the K-line chart, futures are likely to continue to rise.

As of April 8, the closing price of PE futures 1909 contract was 8535, up 4.1% from the closing price of March 29, 8200, and PP futures 1909 contract closing price was 8810, up 6.0% from the closing price of March 29, 8308. So, domestic PE, PP spot can take advantage of this "spring breeze" out of March's volatile market?

In March, the domestic PE and PP markets showed a trend of shock and decline. The main negative factor is that petrochemical stocks have been at a high level.

In January, Petrochemical stockpiles began to accumulate and pressure gradually appeared; in February, when the Spring Festival holidays came, downstream factories basically withdrew from the market, and petrochemical stockpiles accumulated further; after the Spring Festival holidays, Petrochemical stockpiles accumulated rapidly in the case that the downstream has not yet recovered. According to the data monitored by Purchasing, Chemical and Plastic Research Institute, the domestic petrochemical polyolefin inventory reached the highest point of 1.135 million tons on February 18, 5.1% higher than the same period last year. In March, although the start-up rate of agricultural film, packaging film, pipes, plastic knitting and BOPP products enterprises has gradually recovered, Petrochemical stocks have been at a high level, and the downstream digestion speed is far behind the speed of petrochemical stocks accumulation, forming pressure on the spot market, and the market is in a vulnerable situation. Up to now, the mainstream price of LLDPE is 8600-8800 yuan/ton, while that of PP drawing is 8850-9150 yuan/ton, which is basically the same as that of early March.

Under the situation of continuous rising futures, can domestic PE and PP spot take advantage of this "spring breeze" to get out of the turbulent market in March? We analyze the supply and demand and the main influencing factors.

I. Supply Situation

i. Domestic Petrochemical output

First of all, let's take a look at the domestic PE and PP plant overhaul situation and production in April.

In April, the domestic PE unit maintenance loss is expected to be 48.5 million tons, 21.3% less than the 616,000 tons in March; the PP unit maintenance loss is about 130,000 tons, 18.19% less than the 158,900 tons in March.

Although the loss of maintenance of PE and PP plants has been reduced, the domestic production of PE and PP plants will be reduced in April when the start-up rate of petrochemical industry is reduced. According to the monitoring data of Purchasing, Chemical and Plastic Research Institute, the estimated output of PE in April was 1.479 million tons, down 1.96% from 1.588 million tons in March, and that of PP in April was 1.885 million tons, down 2% from March.

ii. Domestic Petrochemical Inventory

After the Spring Festival, domestic petrochemical stocks have remained high, but since mid-March, they have been in a downward trend. By the end of March, Petrochemical stocks had dropped to about 800,000 tons. Petrochemical stocks are still in a downward trend after the Qingming Festival, although there are some stockpiles accumulated due to the Qingming Holiday.

iii. Port inventory

Since late March, the stock of major domestic ports has been in a slight decline trend. Although the recent situation of concentrated arrival at the port, there is no phenomenon of accumulating stock, and the stock is in a slight decline trend.

II. Demand situation

In April, pipe, film, plastic knitting, BOPP and other products industry will gradually enter the peak season. From the recent monitoring data of the Institute of Purchasing, Chemical and Plastic Research, the downstream start-up rate of pipes, films, plastic knitting, BOPP and so on has gradually increased.

Therefore, in the case of overall supply reduction and demand rebound, PE, PP fundamentals will improve and support the situation.

III. Influencing factors of crude oil

Influenced by OPEC production cuts, improvement of economic data of major crude oil consumers, easing of Sino-US trade conflicts and geopolitical tensions in the Middle East, the international crude oil trend has been strong recently. As of April 8, WTI crude oil settlement price was $64.40 per barrel, the highest settlement price since October 31 last year.

Economic data reflect expectations of energy demand. Strong economic data from oil-consuming countries continue to provide strong support for the crude oil market. China's service sector activity accelerated to its highest level in 14 months in March, thanks to solid growth in new business volumes, according to an unofficial survey. Reported that Caixin China General Service Business Activity Index rose from 51.1 in February to 54.4 in March, a new high since February 2018. Over 50 means expansion.

The news of the improvement of Sino-US trade negotiations also provided a boost to the crude oil market. According to the Chinese government website, the 9th round of high-level economic and trade consultation between China and the United States ended smoothly from April 3 to 5. The two sides discussed the text of agreements on technology transfer, intellectual property protection, non-tariff measures, services, agriculture, trade balance and implementation mechanism, and made new progress. The two sides decided to further discuss the remaining issues through various effective ways.

Continued unrest in the Middle East is expected to continue to push up oil prices. On April 8, Trump announced that the United States had listed the Iranian Islamic Guard as a "foreign terrorist organization", which was the first time that the United States had listed a country's military forces as a terrorist organization. And with May approaching, whether the United States continues to exempt countries importing Iranian crude oil has become the focus of market attention.

n May 2018, Trump withdrew from the Iranian nuclear agreement with the participation of the Obama administration and imposed punitive sanctions on Iran's oil, shipping and banking industries in the following months. Trump had asked for Iranian crude oil exports to be reduced to zero, but in November last year eight countries and regions were allowed to import Iranian crude oil temporarily until early May this year. With the approaching period of the US exemption for the import of Iranian crude oil to eight countries and regions, the market is paying close attention to the next steps of the US.

Therefore, in the case of overall supply reduction and demand rebound, PE, PP fundamentals will improve and support the situation.

In conclusion, with the improvement of the basic situation and the continued rise of crude oil, the domestic PE and PP spot market is expected to rebound in April.